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“A Mild Recession”

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Re: “A Mild Recession”

#101

Post by samsonradu »

vorpalhex wrote: post #61
samsonradu wrote: post #51

Earlier quoted context omitted.

That sounds a bit rude, but I'll try to answer anyway. No, I don't have the statistics at hand but I think we can agree that a lot of people go through financial hardship during a recession - basically what a recession means. What part of my comment do you disagree with exactly? That people, in general, overestimate their financial security and capacity to overcome recessions?

I disagree with this: > First of all, the recessions tend to last longer than most people expect/plan for. Statistically, it will turn out their 'secure' jobs will be less 'secure' than expected. Meanwhile their emergency funds will start shrinking (slowly at first, then all at once) due to loss of purchasing power & eventual job loss. Those predictions are not supported by the data, and are distinct from your descri…

Yes, my 'statistics' were implied. I've always seen HN as a place where people can write their opinions even if they're not backed by official statistics. This is not the St. Louis FED website. My opinion is that recessions are worse than people expect because if they weren't people would see right through them and keep the money flowing (spending/investing).

> I disagree with your implied statistics and sloppy use of words.

No problem if you disagree, it would be nice if you elaborate your point though. What exactly do you expect from a recession? What does your data say?

I'd also like to point out that Economics is not really an exact science, even with a ton of data at hand the predictions that economists make are wrong quite often. Specially during the past 2-3 years predictions have been quite bad - fiscal/monetary stimulus doesn't add much to inflation, if it does it will be transitory etc. That's one of the reasons we're in this mess.

Re: “A Mild Recession”

#102

Post by samsonradu »

nh23423fefe wrote: post #28
samsonradu wrote: post #6

Earlier quoted context omitted.

Too young to understand what happened in the 2008 GFC but I doubt the 'feeling prepared' part works like this. First of all, the recessions tend to last longer than most people expect/plan for. Statistically, it will turn out their 'secure' jobs will be less 'secure' than expected. Meanwhile their emergency funds will start shrinking (slowly at first, then all at once) due to loss of purchasing power & eventual job l…

But you just responded point by point with non-sequiturs. I made a comparison between 2007 and now, while you just stated ignorance of the past and made pessimistic assertions of my ability to estimate relative security. Meanwhile you hold a belief like, "the future will be good because capital will be allocated better"

I made pessimistic assertions of the people's ability in general to estimate relative security.

I hold the belief that the LONG term future will be good because capital will be allocated better.

Do not see the conflict between these 2 statements. Also I was 17 in 2007, not sure if it's called ignorance but I didn't understand much of the economic environment at the time.

Re: “A Mild Recession”

#103

Post by sinenomine »

nh23423fefe wrote: post #3

I actually feel really prepared for this one. 2007 made me nervous, but not this one. I feel secure in my employment and I finally have a real emergency fund even if I lose my job. I'm not optimistic about long term though. The infinite growth delusion seems like it will break in my lifetime, retirement is scary

> The infinite growth delusion seems like it will break in my lifetime, retirement is scary

I don't think the illusion of growth is a problem per se. Growth, or at least stability, could be achieved relatively straightforwardly, if only the underlying social dependency ratio weren't growing. It grows though, at least in developed countries, and to any moderately longtermist person this feels like an obvious bomb slowly ticking away, until no time is left anymore.

If no systemic fix is going to be implemented, some generations will end up holding the proverbial bag, and for now it seems that this burden will fall upon the millenials and zoomers when they hit retirement age. Especially the childless.

Re: “A Mild Recession”

#104

Post by wizofaus »

sinenomine wrote: post #103
nh23423fefe wrote: post #3

I actually feel really prepared for this one. 2007 made me nervous, but not this one. I feel secure in my employment and I finally have a real emergency fund even if I lose my job. I'm not optimistic about long term though. The infinite growth delusion seems like it will break in my lifetime, retirement is scary

> The infinite growth delusion seems like it will break in my lifetime, retirement is scary I don't think the illusion of growth is a problem per se . Growth, or at least stability, could be achieved relatively straightforwardly, if only the underlying social dependency ratio weren't growing. It grows though, at least in developed countries, and to any moderately longtermist person this feels like an obvious bomb slo…

Perhaps but I'm willing to bet for the majority of those living in rich/developed countries it'll initially just be a slight (but noticeable) drop in living standards - we'll find ways of pushing the costs of our current lifestyles on to future generations (and to those in less-developed parts of the world) for a while yet. And it's not actually impossible that the right sort of technological innovations will end up cancelling out most of those costs - but at some point even the cost of those innovations may well be more than we're able/willing to pay.

Re: “A Mild Recession”

#105

Post by samsonradu »

jghn wrote: post #25
samsonradu wrote: post #6

Earlier quoted context omitted.

Too young to understand what happened in the 2008 GFC but I doubt the 'feeling prepared' part works like this. First of all, the recessions tend to last longer than most people expect/plan for. Statistically, it will turn out their 'secure' jobs will be less 'secure' than expected. Meanwhile their emergency funds will start shrinking (slowly at first, then all at once) due to loss of purchasing power & eventual job l…

IMO at some point these sorts of disaster scenario thought experiments wind up in a place where if it happens, we're all pretty screwed anyways. Do I have sufficient funds to survive for a while in a typical recessionary environment? Yes. If the shit really hits the fan, markets crash to next to nothing, real estate craters, etc and this lasts for multiple years well yeah. I'm in trouble. But that'll be true of just…

I didn't paint it as a disaster scenario. Having no emergency funds doesn't mean one will starve.

Just to give some examples of a recession being worse that one expects:

  - I might need to sell my 4-bedroom house and move into a smaller house because I can't afford mortgage;

  - I might need to skip vacations this year because I got a pay cut;

  - I have to sell my car and use public transport because I need money and gas is too expensive anyway;
IMO these are situations people are not generally anticipating or prepared for.

Re: “A Mild Recession”

#106

Post by doktorhladnjak »

Jensson wrote: post #38
dcolkitt wrote: post #34

Earlier quoted context omitted.

Why would index fund investors be any more likely to cash out on falling equity values than investors in actively managed funds or single equities? If anything it seems quite the opposite? Index fund investors know the market always goes back up on long enough time frame. Investors in actively managed funds have to continuously question whether their manager is incompetent.

Index funds invests in the whole economy, so when they are overhyped people will over invest in the whole economy, that is the main danger. But yes, the invest/cash out cycle is probably longer than other kinds of investments, so wee see a longer bull run than normal but likely we will also see a longer/deeper recession than normal for the same reason.

Not every index fund invests in the whole economy. Lots of ETFs and mutual funds out there targeting specific indexes that represent only parts of the market. Even relatively broad ones like the NASDAQ, or specific ones for ultra short treasuries.

Re: “A Mild Recession”

#107

Post by abdabab »

azemetre wrote: post #52
jpadkins wrote: post #46

Earlier quoted context omitted.

what tech companies were using cheap capital to achieve insane market cap? Very few tech companies borrow money. Unless you meant people were buying tech stocks with leverage, which I agree with...

DoorDash, Lyft, Uber, WeWork, Instacart, Rapid, Coinbase, Robinhood, etc. I mean I feel like I can list another dozen companies that has been using cheap capital of the last decade to establish themselves.

And that’s not just VC money. Often they have borrowed through issuing bonds.

Re: “A Mild Recession”

#108

Post by Svettie »

formerkrogemp wrote: post #67
lesuorac wrote: post #60

Earlier quoted context omitted.

The earth having limited resources is just the inverse of the market can stay irrational longer than you can remain solvent. Eventually we'll hit that limit [1] but the idea that its going to happen soon is undefended. The issue right now for growth is that we can't mine the earth's resources fast enough right not that we've used it up. [1]: https://en.wikipedia.org/wiki/Heat_death_of_the_universe

Its hilarious how often people who bring up "the market can stay irrational longer than you can remain solvent" also believe in the free market being capable of solving any- and everything. Claiming breathlessly that the efficient market hypothesis is true while also stating the market can be irrationally/inefficiently allocated longer than someone who knows better can remain solvent. Efficiency is not usually tied t…

"Can" is the key word in that quote. It's possible, but not necessarily likely. There's no contradiction.

Efficiency of markets is like the Law of Large Numbers. But it's possible to get n consecutive coin flips that come up heads.

Re: “A Mild Recession”

#109

Post by bagacrap »

atemerev wrote: post #2

Oh, this is just the beginning. Ten years of “oh, just buy index funds” strategy will unwind with a huge snap.

I'm pretty sure I remember hearing my dad tell me to buy sp500 index funds much longer than 10 years ago.

Re: “A Mild Recession”

#110

Post by ShivShankaran »

cmrdporcupine wrote: post #4

nit: "This morning the Bank of Canada announced a 100 basis point interest rate hike. The market was expecting 50 basis points." The market was expecting 75 basis points. That was the consensus. When I see this kind of thing it does make me question the rest of the information points on the article that I am not as well informed on.

The rest of the article is not on point either.. This is not a normal recession. Don't buy the dip now because we are never going back to these heights in a very very long time.

Also the war mongering of US is finally coming home to roost. Picking up fight with Russia and China while India doesn't care is the final slide for the American empire

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